Unlock the White Home Watch e-newsletter free of charge
Your information to what the 2024 US election means for Washington and the world
Donald Trump says tariff is a “stunning phrase”. However he additionally prides himself on being a dealmaker. So the EU method to the president-elect’s tariff threats suggested by European Central Financial institution president Christine Lagarde in an FT interview — “to not retaliate, however to negotiate” — is sensible, a minimum of initially. Any EU provide to purchase extra US items to move off a rancorous commerce struggle ought to, although, be backed up by the understanding that the bloc is able to retaliate robustly if the returning president does go for punitive tariffs. Trump would absolutely seize on something much less as an indication of weak spot.
The commerce menace was amplified when Trump final week pledged day-one tariffs on Canada and Mexico and extra duties on China — highlighting a willingness to explode provide chains even with America’s greatest buying and selling companions. On Saturday, he threatened tariffs of 100 per cent on Brics countries in the event that they undermined the greenback. However tariffs seem as a lot a negotiating instrument as an ideological aim. Managing commerce with the Trump’s US is ready to be a central job of the brand new European Fee, whose time period officially began on Sunday — notably given the EU’s sizeable commerce surplus with the US.
Brussels has already floated shopping for extra US power, army and agricultural items as a concession. Importing extra US liquefied pure gasoline would assist the EU lastly to ban remaining Russian LNG imports. Europe will want US-made weaponry, too, whether it is to shoulder extra of the burden of defending Ukraine. This method neatly targets two Trump priorities without delay: the EU can say it’s bolstering its power and army safety whereas serving to US producers.
However the European Fee is correct to maintain a stick handy in addition to carrots, with plans to hit again if Trump plumps for tariffs. It’s understood to have drawn up retaliatory duties that will notably hit Republican-led US states. Certainly, EU duties on bourbon whiskey, energy boats and bikes, imposed in 2018 after Trump launched tariffs on metal and aluminium imports from the EU and elsewhere, are presently suspended until March.
These may present a bargaining chip — although Trump appears to care comparatively little about hits to the US actual financial system from his arm-twisting on trade. Sustaining EU unity over its response shall be very important given the temptation for member states to hunt US favours to guard their own interests.
To enhance the possibilities of the worldwide buying and selling system weathering the Trump storm, Brussels must also attempt to make sure any take care of the US — and response to potential “collateral” harm from Chinese language imports diverted from the US — doesn’t experience roughshod over commerce legal guidelines. The 2018 bundle supplied by then fee president Jean-Claude Juncker that fended off US tariffs on EU automotive exports, which Brussels’ method immediately partly echoes, bent some inside EU guidelines, however was not a horrible abrogation of WTO legislation.
There are already inevitable calls — together with from new European Fee vice-president Stéphane Séjourné — for a “Europe first” technique for key enterprise sectors. Definitely, if Trump does improve US tariffs on Chinese language items, the EU is more likely to face tough talks with Beijing on limiting a flood of Chinese language exports, much like western talks with Japan within the Eighties, or have to limit them — with doubtless knock-on results by itself exports to China.
Although the EU punches beneath its weight geopolitically, on commerce it has a reputable file of making an attempt to uphold the rules-based order. Onerous trade-offs lie forward. However even because it seeks to defend Europe’s financial pursuits, Brussels ought to do all it may well to stay a constructive drive on commerce, fairly than being sucked into the vortex of an all-out commerce struggle.
